The credit rating of AltynGold Plc (the Company) reflects the very small size of the Company's business in the global gold mining industry, low business profile assessment due to the current low market position, very low geographic diversification, and medium assessment for financial policy and corporate governance. At the same time, the Company's profitability is assessed as high given the prospects for production growth in 2021–2023. The rating is restrained by the low scores for liquidity and free cash flow.

AltynGold Plc is a small UK-registered mining company with assets in Kazakhstan. The Company carries out closed mining of gold and silver at the Sekisovskoye deposit, which has proven and probable gold reserves of 3.8 Moz. The Company also holds a license to develop the Teren-Sai deposit with proven and probable reserves of 1.45 Moz in only one area. These reserves may increase when the reserves in other areas of the deposit are shown on the balance sheet. In 2020, the Company sold 16,500 ounces of gold, which is 57% more than in 2019. The largest shareholder of the Company is the Assaubaevs family holding a 65.6% share through African Resources Ltd.

Key assessment factors

The low business profile assessment is a result of low assessments for the market position, production efficiency, and product and geographic diversification sub-factors. The Company's share in global gold production is insignificant, and in terms of All in Sustaining Costs (AISC), the Company is in the third quartile of the global production cost curve. As production volumes grow, ACRA believes that the Company's AISC of gold will decline, which may improve the business profile assessment. The low score for product and geographic diversification is associated with the Company's focus exclusively on gold and silver mining, as well as the concentration of its operations on a single country and a single deposit.

The medium assessment of financial policy and corporate governance is explained by the concentration of the Company's management functions in the hands of the ultimate beneficiaries and the risks of conflicts of interest that are mitigated by the presence of two independent directors on the six-member board of directors and the Company's public status at London Stock Exchange. The Company's strategy is formulated and assumes a long-term planning horizon. The board of directors approves the Company's strategy, major capital investment projects, prepares annual reports, and decides on the most important financial matters. The audit committee and the remuneration committee are established under the board of directors. The presence of ultimate beneficiaries in the board of directors is a factor restricting the corporate governance assessment.

The financial risk profile assessment is based on the low score for the size of the Company's business (the absolute value of annual revenues is below USD 1 bln) combined with the high volume of proved reserves (the estimated operating life of the deposits in operation exceeds 40 years). The high profitability score takes into account the prospects for production growth in the period from 2021 to 2023 and the corresponding decrease in the gold production costs. The Company's leverage is low: the ratio of total debt to FFO before net interest payments was 2.2x in 2020 versus 5.3x in 2019. ACRA expects the ratio to decrease to 1.5x in 2021 and to increase to 4.8x in 2022 due to the need to finance an investment program, namely, purchase of equipment necessary to increase the volume of ore processing and gold extraction. The coverage (the ratio of FFO before net interest payments to interest payments) was 3.6x in 2020, which is assessed as medium. ACRA believes that this ratio will increase to 6.6x in 2021, and in 2022, it will decrease to 2.8x due to higher interest payments.

Low scores for liquidity and free cash flow are among the factors that have a constraining effect on the Company's credit rating. The Company's liquidity is very low, and the investment program largely depends on the prospects for refinancing the current loan portfolio through the issue of a new bond loan. The Company's internal funding sources (cash) are limited, and the free cash flow (FCF) was consistently negative from 2018 to 2020. In 2021–2023, the FCF will depend on the investment program aimed at increasing the production capacity: in case of its successful implementation, the FCF will be negative, otherwise — positive (due to a significant decline in capex). In its liquidity assessment, ACRA has taken into account the Company's ability to borrow more loans based on comfort letters from banks.

Key assumptions

  • Growing volume of gold production in line with the Company's business plan;

  • The investment program corresponding to the Company's business plan;

  • Average gold / silver prices in 2021–2023: USD 1,480 /23.9 per ounce, respectively;

  • No dividend payouts in 2021–2023.

Potential outlook or rating change factors

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • FCF going up into the positive area and better liquidity;

  • EBIT margin exceeding 30% and an increase in the ratio of FFO before net interest payments to interest payments above 8.0х.

A negative rating action may be prompted by:

  • The ratio of total debt to FFO before net interest payments exceeding 2.5х and the coverage (the ratio of  FFO before net interest payments to interest payments) going below 4.0х;

  • EBIT margin going below 20% and the coverage going below 4.0х.

Rating components

Standalone creditworthiness assessment (SCA): b.

Support: none.

Issue ratings

No outstanding issues have been rated.

Regulatory disclosure

The credit rating has been assigned under the international scale based on the Methodology for Assigning Credit Ratings to Nonfinancial Corporations under the International Scale and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.

A credit rating has been assigned to AltynGold Plc for the first time. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.

The credit rating was assigned based on data provided by AltynGold Plc, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited, and AltynGold Plc participated in its assignment.

In assigning the credit rating, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.

ACRA provided no additional services to AltynGold Plc. No conflicts of interest were discovered in the course of credit rating assignment.

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